Trump comments fire up Kootenay lumber industry

When Ken Kalesnikoff first heard news that President Donald Trump had called the softwood lumber agreement between Canada and the U.S. a “disgrace,” promising to come down hard on the lumber industry with a 20 per cent tariff, he just shook his head.

“I think people are starting to get immune to Trump’s comments, because he keeps making them and they don’t always hold water. He always seems to be antagonistic,” the president of Kalesnikoff Lumber told the Star.

“We were expecting this to come. We knew there was going to be some sort of duty or restriction. It’s a horrible thing because the people who are getting hit by this have the least impact on what the U.S. coalition is claiming.”

This softwood lumber dispute has been ongoing since 1982, and stems from concerns that the Canadian is unfairly subsidizing the industry. Since most of the timber is located on Crown land, the stumpage fees are set by the federal and provincial governments rather than by a competitive marketplace — something U.S. lobbyists take issue with.

But it’s more complex than that, and Kalesnikoff should know. As the board chair for the Interior Lumber Manufacturers Association (ILMA) and the co-chair of the newly created Wood Secretariat, he’s looking to give voice to forestry companies operating across the province.

And though imports to the U.S. make up only a small fraction of some mills’ operations, others rely almost exclusively on that market. “if we do not get a proper softwood lumber agreement, it’s really going to hurt this sector,” said Kalesnikoff.

Former Mayor John Dooley, who is also the community liaison for ILMA, feels the important thing to focus on during this controversy is lobbying the provincial government “to make sure the federal government is taking the best interests of the lumber industry into consideration.”

“They have to create fairness and stability,” Dooley said.

“This is not a new thing. Even though Trump is the one talking about it this time, softwood lumber has been an ongoing issue. The sector is very concerned, and I’m hearing from communities the greater concern about potential impact on the economy.”

So how crucial is lumber to Nelson’s economy? According to the Chamber of Commerce’s Tom Thomson, it’s currently one of the last industries keeping the town afloat.

“We’re still a resource-based region. There are a number of people directly employed in the industry, and indirectly employed as well. I would say it’s a huge player still, very important to us.”

The four independent mills in the general vicinity of Nelson are Kalesnikoff just outside of town, Porcupine in Salmo, Atco in Fruitvale and JH Huscroft in Creston. They employ 150, 125, 62 and 80 employees respectively, with an average salary of $60,000 per employee resulting in a total of approximately $25 million in salaries.

Each of the four mills has a different percentage of their lumber that they ship south, with numbers ranging from five per cent at Atco to 35 per cent at Kalesnikoff and Porcupine and 40 per cent at Huscroft.

There are approximately 800 full-time jobs in related industries, including road-building, tree-planting and fire management. Overall, across the southern interior of B.C., ILMA has a payroll of $53 million, with the secondary jobs receiving $59 million in pay. In an ILMA document called “Our Positive Impact,” they note the broader industries affected, including graphic design, accountants, and advertising.

Thomson said “the industry’s spinoff is tremendous,” noting that not only does the industry attract people to the area, but companies such as Mainjet Motorsports get business from supplying logging machinery.

“I would say this is a big concern, any time there’s a trade dispute between Canada and the U.S. You introduce one tariff and suddenly there’s another one, and then they go after the dairy industry. All of sudden the whole North American Free Trade Agreement is under the microscope and people are saying ‘we should just throw it all out.’”

Thomson said “the bigger the company, the easier it is for them to sustain over a long-term trade dispute.” He noted that there have been instances in the past where the tariffs levied were put into trust and ultimately returned once the issue was settled in court.

“Short-term impact with cash flow, this could be serious, and it could mean lay-offs. Depending on how long it goes for, that’s always a possibility. Right now lumber prices are pretty high, but if you put a 20 or 30 per cent tariff on their profitability will go down.”

Thomson said the lumber industry has been hanging in limbo for years now, since the softwood lumber agreement expired in October 2015. Right now the main thing the industry is looking to do is diversify.

“One thing we really agree with Premier Christy Clark on is diversity,” said Kalesnikoff.

“We can open up markets in China and India, plus the premier’s been talking about new opportunities in B.C. and Canada that are out there. We want to be innovative with what we do with lumber, and more creative.”

As far as the lumber headed to the U.S., he figures one of the biggest markets is for high-end and niche products, something all the mills in ILMA are interested in producing.

“We’re playing nice in the sandbox, we don’t want to create an us versus them scenario. Interfor, Canfor, they’re all good at making two by fours and that’s great. But we’re the ones who are innovative and we’re the ones who think of these things.”

Ultimately, Kalesnikoff figures the tariffs will hurt U.S. consumers.

“This is not about subsidies, this is about market value. They want the market share, they want the prices to go up, and that’s ludicrous because they’re only going to hurt their own people.”

He believes “the people who will win when the dust settles are the landowners who own the trees in the U.S.”